Nutrition for Life's Top Recruiter Has a Criminal Past
Despite Convictions, Trudeau Gets New Distributors to Fork Out the Cash

by John R. Emshwiller
Wall Street Journal, 1/19/96

In less than 10 months, Kevin Trudeau and his marketing organization have
persuaded some 15,000 people to plunk down more than $1,000 apiece for a
highly touted opportunity to sell products.

The 32-year-old recruiter's delighted business partner, Nutrition for Life
International Inc., has already granted Mr. Trudeau so many stock options
that he has a paper profit of more than $11 million. But in his meteoric
career, Mr. Trudeau has acquired some other distinctions: criminal
convictions for larceny and fraud. A previous hotshot recruiter who left some
distributors unhappy also had a fraud conviction from an earlier venture.

Meanwhile, a senior California regulator has some questions about the firm's
marketing practices - though company officials strongly defend those
activities.

Soaring Earnings and Stock Price
None of this has hindered Nutrition for Life. Under various names, the
Houston concern has been around for more than a decade. It. sells about 300
products to its distributors, ranging from cookies to shark-cartilage
capsules to the memory-improvement tapes that Mr. Trudeau is frequently seen
selling on television infomercials. For the fiscal year ended Sept. 30, the
company reported a ninefold jump in earnings to $2.2 million, or 65 cents a
share, on sales of $32.3 million. Its stock has soared more than ninefold
since July.

The number of independent sales distributors who are selling products for
firms such as Nutrition for Life has risen 34% in the past five years to 6.3
million, says the Direct Selling Association, a trade group based in
Washington.

Many firms in the field, including Nutrition for Life and Amway Corp., run
multilevel-marketing programs. Besides earning a profit on sales they make
themselves, participants get a cut of the sales of new distributors whom they
recruit. As those recruits in turn recruit others, the original individual
can derive income from multiple layers of salespeople.

While some distributors have prospered in multilevel marketing, law
enforcement officials say the field also has had fraudulent operations. Their
profits often stem from sign-up fees charged to new distributors rather than
from sales.

Success in the field depends heavily on recruiting distributors to sell
products. Nutrition for Life says that in the past fiscal year, its
distributor ranks rose 50% to more than 57,000. Officials attribute much
of that growth to Mr. Trudeau and his organization, Chicago-based Trudeau
Marketing Group. These days, Mr. Trudeau is going on television and radio to
recruit distributors.

Mr. Trudeau, who joined forces with Nutrition for Life last, spring, receives
commissions on the sales of his recruits. Nutrition for Life also has granted
him options to purchase 500,000 shares of stock at $12.50 a share; yesterday,
it closed at $35, up $5, in Nasdaq Stock Market trading. The company's
products and his marketing skills make for "a perfect marriage," Mr. Trudeau
says.

Guilty Pleas

While a distributor can sign up for as little as $35, almost all of Mr.
Trudeau's recruits initially pay $1,000 for a supply of products and agree to
buy at least $100 a month worth of additional goods in return for, among
other things, a potentially lucrative sales-commission arrangement. Many
allow their credit cards or checking accounts to be automatically billed for
the monthly purchase.

In the past, some people have had reason to regret trusting Mr. Trudeau in
money matters, according to prosecutors. In 1990, the recruiter pleaded
guilty to larceny in a Cambridge, Mass., state court in connection with
$80,000 in worthless checks he deposited at a bank. In 1991, he also pleaded
guilty to credit-card fraud in Boston federal district court. Among his
misdeeds in the federal case, prosecutors said, Mr. Trudeau misappropriated
for his own use the credit-card numbers of customers of the
memory-improvement courses that he offered at the time. Mr. Trudeau spent
nearly two years in prison for his crimes.

Mr. Trudeau, who was in his 20s at the time, blames his "very poor judgment
decisions" largely on his youth and the pressure and confusion of trying to
build a business empire too quickly. The crimes, he insists, "were not
premeditated... "I just shaved the line too close."

But in the sentencing memorandum for his state-court conviction, the
Middlesex County district attorney called Mr. Trudeau's larceny "blatant and
premeditated." Mr. Trudeau even posed as a doctor to increase his credibility
with bank officials, said the court filing.

David Bertrand, Nutrition For Life's president and chief executive officer,
says he isn't troubled by Mr. Trudeau's convictions. In Mr. Trudeau's
dealings with the company, he "seems to operate ethically and honestly," the
official adds.

There isn't any evidence that Mr. Trudeau has committed wrongdolng with
Nutrition for Life. But a recent mailing to a prospective distributor on
behalf of the Trudeau Marketing Group does contain at least one questionable
statement. The cover letter proclaims that "success in the Trudeau Marketing
Group is a given." Regulators routinely caution investors
about promotions that guarantee the performance of a business. Mr. Trudeau
says the mailing was put together without his approval. "We make no
guarantees" as to success, he adds.

Herschel Elkins, head of the consumer law section at the California attorney
general's office, says that would-be distributors should be wary of any
multilevel-marketing program that pushes for a substantial initial purchase
of products and minimum monthly purchases. After hearing a description of
Nutrition for Life's program, he says it appears to fall under state rules
requiring certain kinds of marketing organizations to register with the state
- a step that the company hasn't taken.

Kirkpatrick Dilling, an attorney for Nutrition for Life, says the company
strongly believes it's in compliance with all state laws. He says the company
doesn't come under the California marketing law because it doesn't require
distributors to make the $1,000 in initial purchase or minimum monthly
purchases.

Several distributors interviewed praised the company and its products. "They
truly care about their distributors," says Marty Scirratt in Arlington,
Texas.